Thanks for replying.

I understand the cash flow benefits of IO over P&I.

I do think I will be able to find a loan with an offset account that reduces monthly repayments, which is great.

The reason I'm concerned is that frankly I'm not sure about my employment status, so having the ability to keep repayments low is very attractive. I do have significant savings to put into an offset, however, which is a bit unusual so I've had an interesting time trying to get my head around various appropriate strategies.

IO appears to offer more flexibility, but I could easily get into a difficult situation if I purchased something expensive requiring a big loan that stings me once the IO loan reverts to P&I and the repayments spike. It might be difficult to service the loan and force me to do something that might not be in my best interests at that time. (Who can predict the future?) The market could also tank and affect LVR, so there's a greater than zero risk there, too.

However, the alternative conservative options (e.g. putting more equity into the property, making a small and safe purchase with less potential for capital gain) seem counter-productive for the reasons you suggest.

And to get back to my point about lenders – these decisions are tough enough to mull over without the lack of description and transparency and ease of comparison between the multitude of options for things like offset accounts!

Thanks both – I really appreciate your thoughts and suggestions. It seems we're roughly on the right path, we just need to figure out what we believe is a fair price and of course actually find a PPOR we're happy to eventually own.

I don't know if we're trying to pick the bottom – we're more motivated by a very strong desire to stop renting. But, yes, there's a strong sense of conflict about entering the market now that stems from years of sitting on the sidelines while prices skyrocketed to potentially unsustainable levels.

I probably don't have the intuition/experience to judge a good deal. Is it relevant to think about potential rental yield? Current yield in the area we are looking at most only seems to be about 4.5% (for 2-3 br villa/townie). I would have thought closer to 5.5% or more would indicate a better deal?

We are factoring in interest rates of 9%…that seems to fit with our overall risk profile, but maybe it's still too low?

If we buy a PPOR, what are your thoughts about purchasing an investment property for yield versus purchasing an investment property for capital gain versus offsetting the PPOR's mortgage? What factors should influence those choices?